With a Level Funded Plan, saving money doesn’t have to mean sacrificing security.
Did you know 63% of small business employees spent less than $1,500 on healthcare last year?
For some employers with fully insured health insurance plans, this means they missed the opportunity to get their premiums returned to them from their insurance carrier when their employees had lower-than-expected claims.
What could your organization do with premiums from your health benefits plan?
Could you reinvest and grow? Could you offer richer employee benefits for your staff?
As employers grow in the amount of staff, they often find that self-funding their health insurance plan is a more cost-effective strategy. Moving away from a full-insured health insurance plan to a self-funded health insurance plan can result in many benefits, including a great opportunity to reduce a major cost on a company’s balance sheet. The challenge for small and mid-size employers (typically defined as organizations with less than 500 employees) is that they have limited options with self-funding. When the number of employees at an organization is 100 or fewer employees, there are nearly no options for self-funding…but this is where level funding comes into play.
How does a Level Fund Health insurance plan work?
Level funding insurance is a health plan design option that provides the security of a fully insured plan while offering the potential cost savings and flexibility of a self-insured plan.
In a level-funded plan, an employer pays a “level” fee each month to a carrier, which typically covers the cost of administrative fees, third-party administrators (TPA) and stop-loss insurance. The insurance carrier or TPA will handle facilitating the health plan, including paying out claims.
Just like with a fully insured medical plan, the company pays a set monthly insurance premium throughout the policy period. The advantage is that you are not paying premiums based on community rates. This can be a major financial advantage if you have a healthy population of employees.
These plans are designed specifically for small businesses and they are comprised of three core components:
- Self-Funded Medical Plan: Pays covered medical expenses of your covered employees and their dependents
- Third-Party Administration (TPA): This is an agreement between you and the insurance carrier for claims processing, billing, customer service and other administrative costs
- Stop-Loss insurance coverage: Stop-loss insurance is set to protect your plan from catastrophes by members of your group. If your members make more claims than what you contributed, this is when stop-loss kicks in and will cover any costs over the preset capped amount.
At the end of the plan year, employers may be entitled to a surplus refund if their actual claims are less than projected. If the actual claims exceed what was expected, the employer is protected from the unexpected cost with stop-loss coverage. An additional perk is that employers pay lower monthly premium taxes throughout the year and your plan won’t be subject to state mandates.
